The vital role of retirement planning in Australia: Why you need a financial advisor

As we navigate through the different stages of life, retirement is a significant milestone that deserves careful consideration. Proper retirement planning in Australia is vital for securing your financial future and ensuring a comfortable, stress-free retirement. The importance of retirement planning, the role of a financial advisor, and how financial planning can help you achieve your retirement goals has been summarised below.

The Significance of Retirement Planning

Retirement planning is the process of setting financial goals and creating a strategy to achieve them during your retirement years. In Australia, a robust retirement plan is crucial for several reasons:

1. A Longer Retirement Lifespan: Australians are living longer, and this means that you need a more substantial nest egg to fund your retirement. Proper planning ensures that you won't outlive your savings.

2. Changing Economic Landscape: The economic environment is constantly evolving, making it essential to adapt your financial plans to cope with fluctuations. Retirement planning helps you stay financially resilient.

3. Age Pension Limitations: Relying solely on the Age Pension is not a sustainable retirement strategy for the majority of Australians. It's crucial to build your own financial resources to maintain your desired lifestyle in retirement.

The Role of a Financial Advisor

A trusted financial advisor is a key asset in your retirement planning journey. They bring expertise and experience to the table, helping you make informed decisions and navigate the complexities of financial planning.

1. Personalised Advice: A financial advisor tailors your retirement plan to your unique circumstances, considering your age, risk tolerance, income, and goals.

2. Investment Strategies: Financial advisors can help you build a diversified investment portfolio that aligns with your objectives, whether it's capital preservation, income generation, or growth.

3. Risk Mitigation: They assist in managing risks, ensuring that your retirement funds are protected against market downturns and unexpected expenses.

The Role of Financial Planning

Financial planning is an integral part of retirement planning. It encompasses a wide range of elements that aim to optimise your financial situation for retirement.

1. Budgeting: A financial plan will help you create and stick to a budget, allowing you to save consistently for retirement.

2. Debt Management: Reducing or eliminating debt is an essential part of financial planning, as it frees up more money for retirement savings.

3. Tax Efficiency: Financial planning helps you make tax-efficient choices in managing your finances, reducing your overall tax liability, and boost your retirement savings as a result.

4. Estate Planning: Ensuring that your assets are distributed according to your wishes and with minimal tax implications is an essential aspect of financial planning.

In Australia, retirement planning is a critical component of ensuring a comfortable and secure future. To navigate this complex landscape effectively, enlisting the services of a financial advisor and implementing a comprehensive financial plan is imperative. These professionals can provide the guidance and expertise needed to make informed decisions and secure a financially stable retirement.

Don't wait, start your retirement planning today to enjoy the retirement you deserve. Contact Precision Wealth Advisers to get started on your journey towards a financially secure future. We are here to help you achieve your retirement goals.

Superannuation: Is it time to review your investments?

You may be missing out or taking unnecessary risks if you have a set-and-forget strategy for your super.

A lot can happen between the time you start your first job and the time you retire. From building a career, buying a home and raising a family to dealing with setbacks such as redundancy or divorce, life doesn’t stand still and neither should your investments.

In all likelihood, the investment choice you made at age 25 may no longer be appropriate at age 55 or 60. Or you may not have made an active choice at all, automatically being allocated to your fund’s default investment option.

In most cases, the default option is a ‘Balanced’ or ‘Growth’ investment option which is typically heavily allocated to growth assets. The mix of investments is chosen by the fund manager to suit the average fund member who might be anywhere from 18 to 65 years of age.

The problem with this approach is that we all have a different appetite for risk and different financial circumstances. What’s more, our circumstances and risk appetites usually change as you progress through life.

Check the menu

To make sure your super suits your current needs, start by checking how your money is invested and then compare this with what else is on the fund’s menu.

All super funds have a range of investment options for you to choose from. These vary according to the kinds of assets they hold. Your choice will depend on the amount of risk you are willing to take and the return you’re expecting to make in the long-term.

Most funds offer an a la carte menu of single asset options such as Australian shares, international shares, sustainable shares, property and fixed interest, which you can mix and match to suit if you wish.

Alternatively, you can choose from a selection of ready-mixed options to suit different risk profiles. Different funds use different labels, but according to ASIC’s MoneySmart website there are four broad categories:

• Growth options typically hold around 85% of their funds in shares and property with the remaining balance in cash and fixed-interest investments. High growth options can have up to 100% in shares and property. This aims for higher average returns over the long term, but the ride will likely be bumpier along the way. Losses tend to be higher in bad years when compared with lower risk options.

• Balanced or Moderate options may hold anywhere between 50% and 75% of the investments in shares and property with the rest in cash and fixed interest. Average returns over the long term will be less than the growth option but higher than conservative and cash options.

• Conservative options have around 70% in cash and fixed interest with the remaining balance in shares and property. Average returns are typically lower than growth options over time, however it aims to reduce the risk of loss.

• Cash invests in deposits with Australian deposit-taking institutions or ‘capital guaranteed’ life insurance policies which offer relatively low, stable returns and significantly reduces the risk of loss. A consideration is that returns may not keep pace with inflation.

A matter of time

The thing to remember about risk in investment, as in life, is that time often heals wounds. If you have 20 or 30 years left to work and save, you may consider taking a little more risk than someone with less than 10 years till retirement. That’s because you have more time to recover from the swings and roundabouts of global investment markets.

Time can also eat away at your savings if you invest too conservatively. That’s because inflation reduces the buying power of money over time. So, those with at least 10 years to retirement may consider keeping a substantial portion of their retirement savings in a growth or balanced option.

The argument for reducing your investment risk grows stronger as you near retirement and have less time to recover from a market downturn. Even so, people entering retirement nowadays may still have up to 30 years to plan for. Depending on your circumstances and appetite for risk, it may be appropriate to keep some money in growth assets to avoid depleting your capital too quickly.

Just because super is a long-term investment doesn’t mean it should be filed away in a drawer until you retire. Given that many of tomorrow’s retirees can look forward to living well into their 90s, the reward for taking an active interest in your super is that your savings are more likely to last the distance.

Want to know more?

Speaking to a financial adviser can help you identify what mix of investments are appropriate for you. An adviser can work with you to assess your circumstances and invest accordingly to your needs. If you would like to speak to a financial adviser about your superannuation strategy please contact us today on (08) 8372 7826 for a free financial health check.

How a financial adviser can help in the lead up to retirement

In the last five years before retirement, it’s important to plan for what’s next around the corner, including any changes you might be making as you approach this major milestone.

A financial adviser can help you define what it is you want to achieve in the lead up to retirement and afterwards. They can then give you the confidence and know-how to help you reach your goals.

So what’s on the horizon for you?

1.    Working out how you’ll fund your retirement

Now that retirement is getting closer, you’re probably looking for ways to grow your super savings. How you’ll access that money is also important, as it may affect the tax you pay. A financial adviser can help you:

• Work out and implement strategies to boost your super.

• Create saving plans and spending budgets.

• Decide how to invest your super or other assets and choose investment types that suit you.

• Choose the best retirement income streams for your financial situation.

• Work out strategies that may increase your eligibility for the Age Pension.

2.    Selling an investment property

If you feel the time is right to sell, a financial adviser can help you:

• Decide what to do with the proceeds of the sale.

• Consider any implications of selling before or after retirement. For example, if you sell your investment property before you retire, the Capital Gains Tax (CGT) you pay may be higher than if you sell it after you retire.

3.    Downsizing or making a sea or tree change

If you’re considering moving into a smaller home or to the coast or country, a financial adviser can help you:

• Understand any financial implications, such as your eligibility for the Age Pension. Your home is exempt from means testing, but your super and other investments may not be.

• Budget for moving and buying costs.

4.    Transitioning to retirement

You may be able to take advantage of a transition to retirement strategy that lets you start drawing down your super while you continue to work full time or drop down to part time hours. A financial adviser can help you:

• Make the most of the tax concessions available if you opt to work full-time, top up your super and draw a transition to retirement pension from your super.

• Work out if you can afford to cut down your working hours and use a transition to retirement pension to top up your income.

5.    Planning your estate

Estate planning can be one of the most important things you can do to make sure your family is provided for. It’s more than just having a current will. Together with your legal adviser, a financial adviser can help you:

• Set up a Binding Death Benefit nomination for your super.

• Understand and minimise the tax impact of how your assets will be distributed.

What fees and charges are involved with seeing an adviser?

The initial consultation is free of charge and gives you an opportunity to sit with an expert and identify what areas of advice will benefit your individual circumstances. If you decide to proceed with advice, preparation costs will be discussed and agreed upon before any work is commenced.

Advice costs generally depend on how complex your financial plan needs to be and the amount you have to invest. Whatever the charges, the financial adviser will explain them clearly when they take you through their Financial Services Guide (FSG) during the initial consultation.

Want to know more?

If you feel like you’d like to speak to a financial adviser about your retirement plans please contact us today on (08) 8372 7826 for an obligation-free consultation.

When is the right time to seek financial advice?

There’s no bad time to seek financial advice, however here are five situations where it’s more important than ever to see a financial adviser.

If you think financial advice is just about helping you save more for your retirement, think again. No matter where you are in life, getting quality financial advice can help put you in the best possible place to achieve your life goals, and protect you if things don’t go to plan.

Here’s how your adviser can help you through some of life’s big events.

1. Moving in with your partner

Starting a new relationship can be an exciting time – and it can be easy to get carried away. As you start your life together, a financial adviser can help you plan a new budget, so you can start saving for mutual goals.

Your adviser can also make sure you’re both protected with adequate insurance – something that’s particularly important if you have joint debt or children.

2. Setting up house

These days, buying your first home is harder than ever, with property prices at record highs in most Australian cities. An adviser can help you create a realistic plan to save for a deposit, helping you get your start in the property market.

Once you’ve found the right property, your adviser can help you choose a mortgage and manage your repayments – potentially saving you thousands of dollars in interest over the life of your loan.

3. Ending a relationship

Not every relationship lasts, and break ups can be painful – and often financially detrimental.

Your adviser can help you realign your goals and provide financial structure during a very stressful time. They can also help you get your finances back on track, with a budget to suit your new situation and lifestyle.

4. Changing direction

It’s unlikely that you’ll stay with the same job for your entire lifetime. So if you’re thinking of changing your workplace or embarking on a new career, it’s time to sit down with your adviser. They can help you understand the financial implications of working less, or help you make the most of a promotion or pay increase.

If you’re nearing retirement, you may want to discuss a transition to retirement strategy, so you can spend less time in the office and more time at home. Or if you want to be your own boss, make sure you talk to your adviser about making tax-effective contributions to your super, so you don’t retire without a nest egg.

5. Taking time out

There may be times in your life when commitments like parenting, taking care of elderly parents, studying or travelling will take priority over full time work.

If you’re planning on taking a break from work, your adviser can help you understand your financial options for funding this time off. Remember that while you’re not working you won’t receive any employer contributions to your super. So it’s important to talk to your adviser to help make sure your retirement savings don’t fall behind.